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The last few months of 2011 saw significant developments in the world of public procurement with the introduction of amended time limits for bringing challenges in most of the UK, the announcement of adjusted thresholds and the promise of a new set of consolidated Regulations for Scotland early this year. We have also seen the issue of experience being taken into account at award stage rearing its head again with the European Commission under fire from the European Court. There have also been important guidance documents published including a new Commission guide to green procurement and OFT guidance on the application of competition law to public bodies.

Changes in Time Period for Bringing Challenges

The time period in which a challenge must be brought has been cut significantly in England Wales and Northern Ireland as a result of the Public Procurement (Miscellaneous Amendments) Regulations 2011. The change, which came into force on 1 October 2011, reduces the time period from 3 months to just 30 days. This means that bidders must now bring a challenge to the procurement process within 30 days from the date the bidder first knew or ought to have known of the grounds to challenge the procurement process. The courts have discretion to extend this period up to a maximum of 3 months where there is good reason to do so. It is not yet clear how and when the courts will opt to use this power. The upshot is that it is very important for bidders to act quickly if they suspect a contracting authority has breached the procurement rules at any stage in the tender process or risk being time-barred.

The position in Scotland is currently unaffected, which means that bidders still have 3 months from the date of knowledge of the breach to bring a challenge. However, changes to the Scottish Regulations are imminent and we may well see a similar change north of the border in the near future.

Taking Experience into Account at Award Phase

The dangers of taking experience into account as an award criterion were once again illustrated in a European Court judgment from December. The European Commission held a tender seeking a provider of services related to an internet portal. One of the award criteria used by the Commission was "experience of the Tenderer in similar large international and multilingual projects as well as in the fields of education and training". An unsuccessful tenderer, Evropaiki Dynamiki, challenged the Commission's decision not to award the contract on a number of grounds, including that the criterion used was unlawful.

The Court held that this criterion concerned technical and professional capacity to perform the contract and therefore could not be aimed at identifying the tender offering the best value for money. Therefore, the Commission had not been entitled to use it.

The judgment confirms that blunt questions asking for and taking into account experience as an award criterion are impermissible. What is perhaps more interesting is that the Court did not object to a separate award criterion which looked at the quality of the team proposed for the specific contract. This criterion was aimed at assessing "the quality and adequacy of the proposed technical and organisational arrangements, including the appropriateness of the staff to the tasks which are proposed for them" and took into account, amongst other factors, the experience of the team members. This shows that a more nuanced approach to evaluation probably allows experience to be taken into account if linked to the subject matter of the contract and being taken into account as a part of a permissible award criterion. The message remains that, for the moment, there is a fine line which contracting authorities cross at their peril.

Contract Award Decision Set Aside

The Northern Ireland High Court has set aside a contract award decision of the Northern Ireland Courts and Tribunal Service (NICTS). The contract was for the provision of security and ancillary services to NICTS. Resource NI Limited (Resource) was an unsuccessful bidder notified of the decision to award the contract to G4SUK Limited (G4S). Resource challenged the award decision citing equal treatment and transparency concerns.

Resource alleged that NICTS had failed to evaluate bids in accordance with the tender instructions and specification. The tender documents included a specification for the services clearly stating that all cash lodgements must be collected from the relevant courthouses and delivered to local bank branches on a daily basis. G4S had proposed an alternative cash collection mechanism. Resource claimed that by taking this proposal into account in scoring G4S's tender submission, NICTS had acted in manifest error and had breached the transparency and equal treatment principles.

The court found that as the alternative proposal fell outside the specification, it should not have been considered when assessing G4S's tender submission. By giving credit to something not requested in the tender documents, NICTS had breached the principle of transparency. On this basis the court ordered that the decision to award the contract to G4S be set aside.

This case provides a clear warning to contracting authorities of the importance of considering from the outset any flexibility that may be required in the delivery requirements of a contract. If alternative proposals to deliver the contract are to be considered, this flexibility must be built into the process and made clear to bidders.

Assessing Whether to Advertise Below Threshold

The latest instalment of a long-running Scottish dispute provides useful guidance on the Scottish courts' approach to below threshold contracts. We previously reported that the Sidey judgment finding Clackmannanshire Council had breached the Regulations had been overturned on appeal (see our August 2010 Update).

In the latest instalment, Sidey sought to judicially review the Council's award decision. The Court of Session required to consider considered whether:

EU law obligations applied to the below threshold contract

the Council had created an expectation that equal treatment and transparency would apply to the evaluation of the tender

the Council had breached an implied contract by stating in the tender documents that it would consider all tenders in accordance with the principle of fairness and equality

Although certain features of the tender document could suggest there may have been cross border interest in the contract, these were not conclusive that the Council had considered that such interest existed. Rather the judge placed importance on the attitude of those responsible for the tender and whether they considered the question of cross-border interest. The fact that the responsible individuals who were familiar with the contract did not consider the possibility was regarded as indicative that cross-border interest was unlikely to exist. Whilst this aspect of the judgment may seem surprising, the court also acknowledged that factors such as the modest price of the contract and the requirement to have staff on the ground should also be taken into account in assessing whether cross-border interest exists.

In addition, the Court found that bidders had a legitimate expectation that the Council would apply the process and principles specified in the tender documents including applying the principles of equal treatment and transparency to evaluation. By failing to do so, the Council had failed to apply its procedures correctly and rationally. The Court, however, rejected the arguments that there was an implied contract formed by the tender documents.

Mid-Process Changes and Deadlines for Submitting Bids

A European Court judgment from September helps explain the approach that contracting authorities should take in order to ensure that any mid-process changes allow tenderers sufficient time to prepare their bids. The case concerned the procurement of an IT system by the European Commission. A few days prior to the deadline for receipt of tenders, the Commission changed the minimum turnover requirement for bidders by publishing a corrigendum notice and extended the deadline by a little over a month. Subsequently, an unsuccessful bidder, Evropaiki Dynamiki, challenged the contract award alleging that it had not been given sufficient time to prepare its bid.

The Court noted that the applicable rules did not explicitly address the situation of what was to be done where such a change was made mid-process. It ruled that the time allowed had to be reasonable and appropriate and this would vary on a case by case basis. In this particular case, the 35 day extension allowed by the Commission had been enough, but the Court took account of various factors including the publication of a prior information notice and questions asked by Evropaiki Dynamiki showing that it was actively preparing a bid at certain points in time. The case therefore shows that contracting authorities must consider carefully whether any mid-process changes of this kind require an extension for submitting bids and, if so, a careful judgment as to how much extra time should be allowed.

Commission Guide to Green Procurement

The EU has launched a handbook on "Buying Green", supported by a website with training materials, green procurement criteria and information for contracting authorities. The handbook sets out guidance on integrating environmental considerations in each stage of procurement, including:

defining contract requirements

setting environmental specifications

selecting suppliers

evaluating tenders

contract performance clauses

It also contains case studies on key sectors such as construction, food and catering, electricity and timber. Industry specific examples are available on the associated website. Many organisations will have their own green or sustainable procurement policies in place, but the handbook provides a useful starting point for those looking to implement or further integrate green policies with their procurement strategies.

Commission Tender Documents Unclear

Even the European Commission can sometimes struggle to get its tender documents right, as the European Ombudsman found in July 2011, when it made a finding of maladministration in relation to a procurement by the Commission's liaison office in Kosovo for a Farmer Registration System.

One of the criteria used by the Commission was that all tenderers (including all members of any consortium) had to be "established in a Member State of the European Union". One consortium was rejected because it included a company which was incorporated in the Isle of Man. The company claimed that despite the place of incorporation being outside of the EU, the company was in fact established in Ireland, having a place of business in Dublin and being resident in Ireland for tax purposes. It submitted that the Commission had erred by treating "established" and "incorporated" as synonyms and that there had been a lack of transparency in the tender documents because of the Commission's failure to explain its meaning.

The Ombudsman found that the tender documents were not clear. In particular, it found that it was unreasonable to expect a tenderer to refer to the founding treaty of the EU (as the Commission argued) in order to understand the words used. The Commission could not expect companies from 27 different legal systems to have the same understanding of the meaning of "establishment". The decision underlines the basic but key point that contracting authorities must make sure their tender documents are unambiguous and withstand scrutiny.

Click here to read the Decision of the European Ombudsman closing his inquiry into complaint 920/2010/VIK against the European Commission, published on 18 July 2011.

New Guidance on How Competition Law Applies to Public Bodies

In December, The Office of Fair Trading published new guidance on how competition law applies to public sector bodies. It is important that those involved in public sector purchasing have at least a basic understanding of how these rules might impact on their activities, particularly given increased aggregation of purchasing in procurement and the strong purchasing positions that many public bodies enjoy.

Open Standards Withdrawal

The UK Government has withdrawn its January 2011 Procurement Policy Note on Open Standards in ECJ procurement. The PPN encouraged contracting authorities to use open standards, (defined as royalty free) when purchasing software. However, the recommendation was controversial in that it did not permit the purchase of intellectual property rights which were licensed on FRAND (Fair, Reasonable and Non-Discriminatory) terms, in line with the approach used by the EU in the European Interoperability framework. The EU approach allows use of proprietary and open source software, and in doing so caters for both open source suppliers and proprietary suppliers where a royalty may be essential to the functioning of, and further innovation within the supplier's business. The Government is expected to consult on the matter before issuing further guidance.

New Thresholds

As of 1 January 2012, new thresholds apply to contracts requiring to be procured under the regulations applying to the public sector, utilities and defence sector. The main point to note is that the thresholds have been revised upwards. Click here to see the new thresholds.

If you have already started a procurement using the old thresholds, don't worry, these are just for new procurements where you are now considering whether and how to advertise after 1 January 2012.

New Procurement Regulations for Scotland

The Scottish Government has indicated that Scotland is to get new procurement regulations early in 2012. The new regulations are likely to incorporate a number of changes in response to developments in case law and legislation over the last 18 months. As well as consolidating previous amendments the new regulations will include new rules on the timescales for tenderers to bring procurement challenges. The Scottish Government has not yet confirmed whether these timescales will match the reduced 30 day time limit for bringing claims which has been in force in England & Wales since the beginning of October 2011. The new regulations will also add new bribery and serious organised crime offences to the list of mandatory rejection criteria.

The new regulations are likely to apply until 2014, when new procurement directives, on which the European Commission is currently consulting, are likely to come into force. These new directives may include more radical changes such as greater use of the negotiated procedure, and reductions of documentation requirements.

Watch out for our Spring Procurement Seminar which will cover the new Scottish Regulations in more detail.

Contact Us

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